WASHINGTON, July 21 (DC Times Online) — The U.S. Department of Education said it has issued a final rule creating a new accountability system for postsecondary programs that do not show enough earnings after graduation.
The rule, called the Student Tuition and Transparency System, or STATS, is meant to make colleges and universities show that their programs give students a financial return. Under the department’s standard, undergraduate programs must show that graduates earn more than the typical high school diploma holder. Graduate programs must show that graduates earn more than the typical bachelor’s degree holder.
If a program fails that earnings test in two out of three consecutive award years, the department said it will lose eligibility for the federal Direct Loan program. If it keeps failing for three years, the department said it could also end Title IV eligibility, including Pell Grant eligibility, for all of an institution’s low-earning outcome programs.
What the rule is trying to do
The department said the final rule is meant to bring together new and existing earnings-based oversight. It ties the new standard to the department’s Financial Value Transparency and Gainful Employment rules, while applying a common framework to nearly all programs and sectors, regardless of tax status or credential level.
That matters because Title IV is the main part of federal law that lets schools take part in federal student aid programs. Direct Loans are federal student loans. Pell Grants are need-based grants for lower-income students. If a program loses access to those dollars, students may have fewer ways to pay for it.
How schools will be measured
According to the department’s regulations, schools will have to report program-level and some student-level information, including tuition, fees, and financial aid such as grants and scholarships. The department said earnings data will come from at least one federal agency and will include students who are working and not enrolled during the earnings-measurement year.
That means the department is not looking only at whether students finish. It is also looking at what graduates earn after they leave and whether those earnings clear the benchmark set for that type of program.
Who is exempt
The rule includes a few carveouts. The department said an institution is exempt from automatic loss of Title IV eligibility if it has not participated in the Direct Loan program for the five most recently completed award years. It also exempted institutions that exclusively serve individuals with documented disabilities.
The department said it will also delay consequences for certain programs that prepare students for jobs where a majority of workers receive tipped income. That delay is meant to let the department use earnings data from tax years when the “No Tax on Tips” policy is in effect, beginning with the 2026 tax year.
When it takes effect
The department said the final rule will be on public inspection in the Federal Register on June 30, 2026, and published on July 1, 2026. The material provided does not fully reconcile all timing details, but NPR reported that the department said it would begin calculating the first year of graduate earnings in early 2027, and that some programs could be designated as low-earning outcome programs starting in the 2028-2029 financial aid award year.
Under Secretary Nicholas Kent told NPR, “If a program cannot show that it leaves its graduates financially better off than if they had never enrolled, it should not be underwritten by federal taxpayers.”
For students and families, the practical effect is that federal aid may now be tied more tightly to whether a program can show graduates earning above a basic benchmark. For colleges, the rule adds a new pressure point: programs that do not help graduates earn enough could eventually lose access to the federal money many students use to attend them.
